Macau’s GDP tumbles in 1Q as GGR keeps sliding

Macau’s gross domestic product (GDP) for the first quarter of 2015 shrank by 24.5 percent year-on-year in real terms, said the city’s Statistics and Census Service on Thursday. The decline in GDP accelerated from the 17.2-percent drop seen in the final quarter of 2014, as the city’s gross gaming revenue keeps falling.

Analysts have linked the decline in GGR with a widening anti-corruption drive in mainland China and a slowing economy there that has kept Chinese high stakes gamblers away from Macau’s gambling tables.

The economic contraction “was mainly due to a substantial decline in exports of services, of which exports of gaming services plunged by 39.7 percent year-on-year and exports of other tourism services dropped by 17.7 percent,” said the government body.

Gaming services in Macau are included in exports when calculating the city’s GDP. That is in order to reflect expenditure by tourists in the city’s casinos.

Macau’s first quarter fall in GDP from a year earlier is the deepest on record since quarterly numbers are available in 2002. It is also the lowest quarterly result since the third quarter of 2012, according to official data.

GDP growth for the whole of 2014 was nearly flat, contracting by 0.4 percent in real terms, official data showed.

Casino GGR in Macau was MOP64.8 billion (US$8.1 billion) in the three months to March 31, compared with MOP102.2 billion a year earlier, show data from the city’s gaming regulator, the Gaming Inspection and Coordination Bureau.

The year-on-year decline is expected to continue in May although the monthly tally may improve from the previous month, according to investment analysts.

“Up to 25 May 2015, we estimate that Macau gross gaming revenue was MOP16.2 billion, implying average daily revenue (ADR) of MOP648 million,” said a note from Kenneth Fong and Isis Wong of Credit Suisse AG. The ADR in April stood at MOP639 million, according to the bank.

However, the analysts noted, “the ADR post the May Golden Week (MOP600 million/day) still tracks lower than MOP639 million in April (weakening from MOP693 million in March) which suggests the underlying fundamentals are still weak”. The Credit Suisse team said May GGR is on track for a 38-percent year-on-year fall.

The opening of Galaxy Macau Phase 2 and Broadway at Galaxy Macau on Wednesday will be closely monitored by analysts to check for signs of incremental demand in the market.

“Given the new hotel and table capacity that comes on stream this week from Galaxy Phase 2, we revise our May GGR forecast to MOP20.3 billion; -37 percent year-on-year versus our previous forecast of -39 percent,” CIMB Securities Ltd analysts Michael Ting and Jensen Poon said in a note on Tuesday.

"We are building momentum and continuing to grow our business while at the same time operating more efficiently"Barry CottleChief executive and president of casino equipment maker and lottery services supplier Scientific Games